Morning Commentary

March corn up ¼ at $3.8975

March beans up 1 ¾ at $9.44

The DOW is down

USD is stronger

Crude oil up $.48 at $58.56

Good morning,

Corn  prices appear to remain stuck in this $3.75 to $4.10 range. Bulls argue that overall “demand” is going to improve as supplies have to accommodate a record number of U.S. hog and poultry and an increasing number of cattle on feed. At the same time, we could soon see increased buying of U.S. corn, ethanol and DDGS by the Chinese after officially signing the “Phase 1” trade deal. Bears point to the fact South American weather has improved. Producers in Brazil are being encouraged to plant more second-crop acres because cash supply in many parts of the country is extremely tight. Recent rains have also helped ease some of the crop stress, with reports out of Argentine that less than 10% of the growing regions are now struggling and need more widespread moisture. Here at home, bears are now looking to 2020 and just how many more corn acres are going to be planted? Keep in mind, the USDA estimates we planted 89.7 million corn acres this past year with one of the most problematic spring weather of the past 100-years. The USDA also estimates that we harvested about 81.5 million acres. Bottom-line, the trade is going to start seeing headlines that talk about +85 million harvested acres and +170 average yield, which means early talk of a +14.5 billion bushel U.S. crop.

Soybean  traders have all eyes on the U.S.-China trade deal and specific details of the “Phase 1” agreement. Will China be a big buyer nearby of U.S. soy as a token of good faith? Or will Chinese buyers wait to be larger buyers late-summer and fall when U.S. prices become more competitive and South American supplies have become more depleted? Weather in South America appears to be slightly improved on better moisture in the mix. Reports out of Argentina show approximately 95% of their acres are planted and fewer acres are needing a big drink. Here at home, there’s been good moisture in the forecast, with perhaps even excessive soil moisture in many areas. Bears see the recharged soils as providing even greater potential for +10 million more planted soybean acres in 2020. Keep in mind, the USDA estimates we planted just 76.1 million soybean acres in 2019 because of the massively difficult spring weather vs. 89.2 million in 2018 vs. 90.2 million in 2017. In other words, if the weather cooperates and producers get the opportunity we could easily see a +10 million acre jump in soybeans. Remember, there is close to 20 million “preventive plant” acres that will be looking for a home in 2020???

Cash cattle was slow to develop last week, but did manage a moderate trade at steady in the south and steady/firm in northern feeding regions. The outlook going forward is mixed, bulls will tout the packer could not manage to buy enough to fill needs in the near term and bears are fearful the stalling cash trade is a sign of lost leverage. Taking all of the factors into account, the latter scenario seems potentially more of a reality. Weights are historically large, especially in the south. The heavier weights, moderate kills and quite large beef production will keep the pipeline very full. Packing margins have been compressed as falling beef prices and rising cattle prices have neared an inflexion point. Spot beef markets finished slightly higher last week while the comprehensive beef market was effectively steady to start the new year. A lot of nail biting and anticipation surrounding global beef markets. Concerns over the Australia tragedy, rebalancing Chinese and other Asian demand and the impacts of ASF remain some of the focal points. Slaughter is going to be challenging for a bit as packers are less incentivized to push with lower margins and seasonally lighter demand. Futures markets continue to trade surprisingly resilient. The charts are beginning to look rather toppy, but technical remain strong above key support levels. Recent history has evidenced that the highs 120s to low 130s in cattle and high 150s to low 160s in feeders is strong resistance. The current setup is pointing towards a very early spring high. In the last few years we have seem these highs put in anywhere from February through March and the earlier seems more likely.

The world’s largest retailer is entering the beef business. Walmart has officially opened a new beef packing facility in southwest Georgia. The facility will employ 350 people working to supply Black Angus beef to 500 retail stores in the southeast. Walmart announced in April their cattle will be sourced from 44 Farms, a Texas-based Angus seedstock operation. They will be finished at Mc6 Cattle Feeders outside of Hereford, Texas, then processed by Creekstone Farms in Arkansas City, Kansas. Cattle in the feeder calf program for Walmart receive no hormones, are predominately “Angus Strong” genetics and meet USDA’s definition of Angus. Before the venture, Walmart sourced most of its beef from Cargill and Tyson Foods. (Source: Brownfield Ag)


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